tax the rich

In the war of rhetoric that has developed in Washington as both sides blame each other for our economic mess, one argument has been repeated so often that many people now regard it as fact:

‘Rich people create the jobs.’

Specifically, entrepreneurs and investors, when incented by low taxes, build companies and create millions of jobs.

And these entrepreneurs and investors, therefore, the argument goes, can solve our nation’s huge unemployment problem — if only we cut taxes and regulations so they can be incented to build more companies and create more jobs.

In other words, by even considering raising taxes on “the 1%,” we are considering destroying the very mechanism that makes our economy the strongest and biggest in the world: The incentive for entrepreneurs nd investors to build companies in the hope of getting rich and, in the process, creating millions of jobs.

Now, there have long been many problems with this argument, starting with:

Taxes on rich people (capital gains and income) are, relative to history, low, so raising them would only begin to bring them back in line with prior prosperous periods, and

Dozens of rich entrepreneurs have already gone on record confirming that a modest hike in capital gains and income taxes would not have the slightest impact on their desire to create companies and jobs, given that tax rates are historically low.

So this argument, which many people regard as fact, is already flawed.

But now a super-rich and super-successful American has explained the most important reason the theory is absurd, while calling for higher taxes on himself and people like him.

The most important reason the theory that “rich people create the jobs” is absurd, argues Nick Hanauer, the founder of online advertising company aQuantive, which Microsoft bought for $6.4 billion, is that rich people do not create jobs, even if they found and build companies that eventually employ thousands of people.

What creates the jobs, Hanauer astutely observes, is a healthy economic ecosystem surrounding the company, which starts with the company’s customers.